Canadian-owned TD Bank has become the largest US bank to face a money laundering fine from US regulators.
TD Bank, the 10th largest bank in the US, will pay a record $3 billion fine for what regulators described as the financial group’s lax practices, which allowed significant money laundering over a nine-year period.
The US-based TD Bank pleaded guilty to conspiracy to commit money laundering, making it the largest bank in US history to do so, Attorney General Merrick Garland stated at a media conference on Thursday.
“TD Bank created an environment that allowed financial crime to flourish,” Garland said. “By making its services convenient for criminals, it became one.”
High-level executives were alerted to serious problems with the bank’s anti-money laundering program but failed to address them, as employees openly joked about how easy it seemed for criminals to launder money there, Garland noted.
Bharat Masrani, CEO of the Canadian-based TD Bank Group, stated that the company takes full responsibility and has been cooperating with the investigation. The bank has been implementing changes to its US anti-money laundering program, including appointing new leadership and hiring hundreds of new specialists.
In his statement, the CEO mentioned that the total fine of $3.09 billion was largely covered by provisions previously made totaling $3.05 billion.
Despite the provisions covering the fine, investors were unhappy, causing shares to drop 5% on the Toronto Stock Exchange on Thursday. As a result, shares in the parent company are now down 8% for the year to date.
This reaction from the market is understandable given the severity of the charges, the size of the fine, and the restrictions imposed on the bank’s US operations.
TD Bank will pay $1.8 billion to the Justice Department, $1.3 billion to the Financial Crimes Enforcement Network, and $450 million to the Office of the Comptroller of the Currency.
The bank will also face restrictions on its growth in the US, with a cap of $434 billion in assets in a business that accounts for a third of the company’s total earnings.
Additionally, it will be subject to a monitoring program, according to a statement from the Office of the Comptroller of the Currency, which noted that TD’s “persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars.”
The US government reported that TD Bank allowed at least three separate money laundering networks to move a total of $670 million through TD Bank accounts over several years, making the bank a preferred choice for multiple criminals and money laundering organizations.
“From fentanyl and narcotics trafficking to terrorist financing and human trafficking, TD Bank’s chronic failures provided fertile ground for a host of illicit activities to penetrate our financial system,” said Deputy Secretary of the US Treasury Wally Adeyemo.
Furthermore, the government indicated that one individual moved more than $470 million in drug proceeds and other illicit funds through TD Bank branches, bribing employees with over $57,000 in gift cards.
Two dozen people have been prosecuted for their involvement in money laundering schemes, including two TD Bank employees, Garland stated, adding that the investigation is ongoing.
The $3 billion fine is comparable in size to the fine imposed on Wells Fargo by regulators over its long-running fake accounts scandal, as well as the lengthy cap on the size of its balance sheet, which restricted earnings growth for five years.
Such fines are not uncommon in Australia; both the Commonwealth Bank and Westpac faced penalties due to investigations by AUSTRAC into what were found to be weak anti-money laundering and terrorist financing controls.
